As second wave of state storage targets builds, utilities propose new projects

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Energy storage has been taking root across the country, but coastal states, such as California, Massachusetts and Oregon, have taken the lead in implementing related policies. That could change as states such as Colorado and Nevada move closer to potentially ambitious policies to support energy storage.

Rising renewable penetration combined with falling costs for lithium-ion batteries is driving many states to explore policies that encourage energy storage.

New Jersey became the most recent state to adopt an energy storage target when Democratic Gov. Phil Murphy in May signed a bill that establishes a 2,000 MW by 2030 target. And in New York, the Public Service Commission is in the process of setting an energy storage target that some observers say could end up as high as 3,000 MW by 2030.

But Arizona could be the next state to adopt an energy storage goal, if Commissioner Andy Tobin has his way.

"Energy storage is high on my list," Tobin told Utility Dive.

The man with the plan

The Energy Modernization Plan that Tobin released in January includes a recommended target for 3,000 MW of energy storage deployed by 2030. The plan would have the state be powered by 80% clean energy by 2050, from 15% by 2025, and directs the investor owned utilities to build 60 MW of biomass plants for service by 2022.

The Arizona Corporation Commission (ACC) "could be voting on the plan by January or February," Tobin said.

"We thought we had enough votes" to put it on the docket, Tobin said at the commission last month. Instead, the ACC decided to do a study on the financial impact of the plan. That study, being prepared by the state’s Residential Utility Consumer Office, should be ready in about two weeks.

Tobin wants to see the adoption of his plan ahead of the next fire season, as the biomass plant component could burn fuel from Arizona's forests and lessen the devastation of forest fires.

Tobin is optimistic, noting that some commissioners are already on board.

The state’s investor-owned utilities have responded to the proposed energy plan with proposals for energy storage projects, according to Tobin. Tucson Electric Power is considering participating in the 2,000 MW Big Chino Valley Pumped Storage Hydroelectric project proposed by ITC Grid Development. And Arizona Public Service has proposed a solar-plus-storage project that includes a 50 MW, 135 MWh battery to serve a 65 MW solar farm.

Following suit

In addition to the progress in Arizona and New York, Timothy Fox, vice president at ClearView Energy Partners, is also tracking developments in Nevada where a regulatory proceeding is underway to create a storage target pursuant to S.B. 204, enacted last spring.

GTM Research also recently began tracking Nevada and Colorado for energy storage policies.

"There are some large utility projects going on" in Nevada, Brett Simon, senior energy storage analyst at GTM Research, told Utility Dive. The state's constant shifts on net metering policies for solar power are driving interest in residential storage that can be used to time shift solar power generation from mid-day to the evening, he said.

NextEra Energy has proposed a 500 MW solar-plus storage project in Nevada outside of Pahrump. A joint venture of Australia’s Quinbrook Infrastructure Partners and Arevia Power of California has also proposed the Gemini Solar Project near Las Vegas that would eventually be capable of generating up to 690 MW and include some battery storage.

In Colorado, Simon noted that the state legislature passed SB 18-009, which establishes the right of consumers to install energy storage devices on their property as a means of enhancing grid reliability and reducing the need for additional generating plants. Another bill, HB 18-1207, directs the state’s Public Utilities Commission to include energy storage in utilities' long-term planning processes.

"Colorado is clearly on a path legislatively for energy storage," Simon said. "I wouldn’t rule out targets entirely, but they are not going to happen right now. The state is about where Massachusetts was two years ago, but will probably move faster than Massachusetts."

"When a state sets an RPS, the objective is clear. With a storage mandate, it is less clear."

Scott Baker

Senior business solutions manager, PJM

Last June, after years of study and preparation, Massachusetts set a target of 200 MWh of storage by 2020. Even after approval of its energy storage target, Massachusetts had further to go to truly open a market for energy storage in the state.

Stakeholders recently reached a compromise on issues involving the ownership of capacity rights for energy storage facilities in the state. Developers had argued that if utilities had been able to retain those rights, it would have put a damper of the development of energy storage in the state.

The wholesale connection

Access to capacity markets could prove to be a key to the development of energy storage, regardless of state policies. That is particularly true in the 13 states that participate in the PJM Interconnection’s wholesale power market.

"When a state sets an RPS, the objective is clear. With a storage mandate, it is less clear," Scott Baker, senior business solutions manager at PJM, told Utility Dive. "What is the mandate trying to accomplish? It is not a bad thing, it just has to be sorted out."

It is important to understand the value the state is getting at the retail level and at the wholesale level, Baker said. And one of the key questions, he said, is how to ensure that a facility is not being paid twice for the same output or service.

For example, if a storage facility was eligible for net metering and a state was paying for energy, that resource should not be eligible to participate in PJM’s energy market, Baker said. That is similar to the issues that arose in Massachusetts. In the past, solar power has not had a direct revenue stream for capacity. Its capacity value was more comparable to a demand side management asset that could reduce load by reducing the need for power at critical times.

But energy storage has the potential to change that equation, particularly when it is combined with solar power. While the advantages of combining storage with solar to help stretch out solar output may seem obvious, the combination presents problems for competitive wholesale power markets that were set up before energy storage became a more viable option.

When storage is used to hybridize a generation resource, whether it is a solar facility or a gas-fired generator, it presents a problem for RTOs. It does not fit neatly into their rules. "Is it one unit or two different units?" asked Baker.

"In PJM, and most markets, it is treated as two different units," Baker said. That is because market rules call for generators to bid cost-based offers into the market and the cost basis of the generating portion and the storage portion of the facility are very different. "It is not an unsolvable problem," Baker said, but it is one that will have to be dealt with as more states adopt energy storage targets.